The Airbnb Tax Trap: What Hosts Need to Know About Collecting Hidden Taxes

In the ever-evolving short-term rental market, staying compliant with tax regulations is crucial for Airbnb hosts. While Airbnb collects and remits certain taxes on behalf of hosts in many jurisdictions, there are cases where pass-through taxes—taxes that Airbnb doesn’t collect automatically—must be handled by the host. These taxes vary by location and can include local occupancy, sales, or tourism taxes.

In this guide, we will walk through the key steps to properly collect and remit pass-through taxes using Airbnb’s professional hosting tools and ensure full compliance with your local tax laws.

Use Professional Hosting Tools to Add Taxes to Your Listings

Airbnb provides professional hosting tools that allow you to collect taxes directly from your guests. By using this feature, you can set:

• Tax type (e.g., occupancy tax, sales tax)
• Type of charge (percentage per booking, fee per guest, fee per night, or fee per guest per night)
• What the tax applies to (nightly price, fees like cleaning, or other charges)

To enable this feature:

1. Turn on professional hosting tools by navigating to your listing settings.
2. In the Taxes section, choose the tax type and amount being collected.
3. Provide your Business tax ID and Accommodations tax registration number if applicable.
4. Save your settings, and guests will be notified of the applied taxes during the booking process.

Understand What Can and Cannot Be Taxed

Knowing what is taxable is essential to avoid under- or overcharging your guests. Common taxable items include:

• Nightly rate (including Airbnb host fees)
• Cleaning fees
• Management, linen, or community fees

However, certain charges are not taxable, including:

• Airbnb guest service fees
• Security deposits

Check with your local jurisdiction or a tax professional to ensure you are taxing the correct components of your listing.

Tax Submission Methods

Depending on your region, there are two main ways to manage tax collection on Airbnb:

1. Airbnb Collects and Remits Automatically: If Airbnb already collects taxes on your behalf (e.g., occupancy tax), you can add additional taxes if needed, such as a local tourism tax. Airbnb will pass the additional taxes to you, and you will be responsible for remitting them to the local authorities.
2. Opting Out of Default Tax Collection: In some jurisdictions, you may opt out of Airbnb’s default tax collection. If you choose this option, you will be responsible for collecting and remitting all relevant taxes, including those Airbnb previously handled. Be cautious, as opting out may increase your administrative responsibilities.

Review Your Tax ID and Registration

Certain jurisdictions require specific tax IDs, such as:

• Business tax ID (e.g., EIN in the US, UTR in the UK)
• Accommodations tax registration number (e.g., transient occupancy tax number in California)

Adding this information to your Airbnb listing is optional but may be necessary for tax filing purposes. Ensure you understand the types of IDs required in your jurisdiction and where to obtain them.

Selecting a Taxable Base

When setting up taxes, you have the option to apply them to various price items, such as:

• Base price
• Cleaning fee
• Resort fee
• Management fee

For percentage-based taxes, multiple taxable bases can be selected within one rule. However, be aware that taxes will only apply if you have set a price for that item.

Manage Tax Exemptions and Maximum Caps

In some regions, tax exemptions apply to certain bookings:

• Long-term stays: Some jurisdictions exempt bookings exceeding a set number of nights from certain taxes.
• Conditional exemptions: Taxes may only apply to the first few nights of a stay.

Additionally, many jurisdictions place a maximum cap on the amount of tax that can be collected. For example, a jurisdiction may cap the tourist tax at €5 per person per night, even if the booking exceeds a specific rate.

To ensure compliance, consult your local tax authorities to confirm whether exemptions or caps apply in your area.

Understand How Tax Payouts Work

Taxes added through Airbnb’s professional hosting tools are calculated from your payout, meaning they will be deducted separately from your other earnings. It’s essential to ensure that your pricing accounts for the tax collection, as it will affect your total earnings.

For example: If your nightly price is $100 and your occupancy tax is 5%, the guest will be charged $105, and you’ll receive a payout of $95 (after the 5% tax and Airbnb’s host service fees are deducted).

Reporting and Submitting Taxes

As a host, you are responsible for:

• Remitting all collected taxes to the relevant authorities.
• Filing tax returns on a quarterly or annual basis, depending on your jurisdiction.
• Keeping accurate records of the taxes collected from guests and paid to the authorities.

Transparency with Guests and Authorities

Guests are informed of the taxes you’ve applied during the booking process under the Occupancy Tax section. Additionally, Airbnb may disclose data related to transactions, such as:

• Listing address
• Applicable tax amounts
• Transaction dates

This information is shared with relevant tax authorities to ensure compliance.

Conclusion

Properly collecting pass-through taxes not collected by Airbnb is a crucial part of staying compliant as a short-term rental host. By utilizing Airbnb’s professional hosting tools, setting the correct taxable base, and understanding your local tax obligations, you can effectively manage your pass-through taxes and avoid penalties.

Stay informed, stay compliant, and ensure that your guests have a smooth and transparent booking experience.

‍